Search This Blog

Subscribe to this blog

Follow by Email

Nigeria Bribery Scandal Reflects Cost Of Doing Business In Petrostates

This month, high-ranking officials of two major international oil companies (IOCs) will go on trial in Milan for bribing officials in Nigeria to secure lucrative contracts. The case marks the third major corruption scandal that has touched large oil companies in recent years.

In Brazil, Petrobras contractors overcharged the oil company for work and then kickbacked bribes to company executives and politicians. The probe into the operation was launched in 2014, and the scandal hit the country’s economy and political establishment, with officials at the top of both Petrobras and the government implicated. In 2016, investigative journalists found that Monaco-based Unaoil, a family-run company, formed an international bribing network to secure oil and gas contracts for clients.

Now, in what is even bigger than those two, Royal Dutch Shell’s former head of international oil development, Malcolm Brinded, and Eni’s CEO Claudio Descalzi are alleged to have paid more than $1 billion to a former Nigerian oil minister. The case involves Eni and Shell’s purchase of Nigeria’s OPL-245 offshore oilfield, one of the most valuable oil blocks in Africa. Prosecutors claim that company officials used bribes to win the license to explore the field.

“There has been greater scrutiny around corruption issues over the past 15 years,” Aubrey Hruby, a Senior Fellow at the Atlantic Council, told The Fuse. “This case is not a deviation by any means, but the money involved is mind-boggling.”

The case shows the risks Western corporations must take to navigate the complex politics of oil-producing nations in order to compete for limited resources. IOCs will continue to come under more scrutiny after this investigation, and the more they want to invest in petrostates, the greater the possibility of yielding to illegal activities.

The scandals have come about in large because of increased transparency, whether through leaks of corporate data and emails, revelations from the Panama and Paradise Papers, or campaigns launched by groups such as Global Witness. Moreover, the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act have exposed international corporate misconduct.

The international nonprofit Global Witness obtained emails showing that the money Shell and Eni paid for the rights to the Nigerian block went to Malabu Oil and Gas, a company run by Dan Etete, the former Nigerian oil minister who was convicted of money laundering. The trial will likely focus on when the executives knew where the money was ultimately going.

For Western companies, one question moving forward is whether they can withstand a new era of transparency and change their practices.

Wenar explains that Western majors have traditionally held a competitive advantage in gaining access to resources in oil-producing states, but that may be eroding. Their technical expertise and managerial skills have been an important selling point to get awarded contracts. But the Chinese companies are catching up to the West. The oil majors and other Western IOCs still have an advantage over their counterparts in their better understanding of how politics work in petrostates. However, that has taken a hit with the latest revelations about possible bribery. Shell has operated in Nigeria for decades: The Anglo-Dutch major has been able to operate within a complicated political scene, and the two sides know each other well. Yet, the oil major is still involved in a major scandal.

“Companies need people to understand the political environment,” said Wenar. “It’s important to remember that corruption is the system in some of these countries. That’s how they’re governed. Oil money goes to the top and then it’s distributed to lower levels in exchange for loyalty.”

Hruby argues companies will be more conservative in making investments moving forward. “The investigation drives fear into the hearts of senior executives,” she said. “General Counsels will become even more involved in the investment process, which slows things down. Companies will be more nervous to do business in frontier markets.”

Systematic problems in Nigeria

The Nigerian oil industry is of course no stranger to misconduct, and there is no guarantee it will change its ways even if the trial exposes more malfeasance. “Corruption in Nigeria’s oil industry has been remarkably systematic despite many campaigns by the government and parts of society to remedy it,” Michael Ross, a professor at UCLA and the author of The Oil Curse: How Petroleum Wealth Shapes the Development of Nations, told The Fuse.

Ross also sees little change among IOCs, including Shell, despite recent scandals and calls for transparency. “Shell, the Nigerian government, and NNPC have been very innovative in adapting to new anti-corruption regulations and initiatives,” said Ross. “It’s worth remembering that oil companies are remarkably sophisticated and organized. They have stayed on top of the private sector globally for a long time despite countless scandals.”

Nigeria relies on oil and gas for roughly 95 percent of its exports, making its economy highly vulnerable to price fluctuations and exploitation. Transparency International, a non-profit that tracks corruption on a country-by-country basis, ranks Nigeria 148 out of 180 in its index. In the latest Resource Governance Index (RGI) from Natural Resource Governance Institute, Nigeria scores 42 of 100 points and is ranked number 55 among 89 assessments.

In a reflection of deep-seated wrongdoing, an audit in 2016 showed that state-run Nigerian National Petroleum Corporation (NNPC) did not pay $16 billion in revenue owed to the state’s treasury in 2014. Other findings were that the company repeatedly violated numerous rules, cheated taxpayers, and repeatedly committed fraud. The audit also highlighted questionable actions surrounding the awarding of production contracts—which is central to the upcoming trial.

No matter what the outcome of the trial is, recent news is unfavorable for the oil industry and petrostates similar to Nigeria, as it comes after other major scandals. The investigation is a reminder of the wide-ranging consequences of doing business in countries where mismanagement of resources is persistent.

Comments

BIAFRA

Translate

Popular Posts

California Attorney General Xavier Becerra, right, accompanied by Gov. Gavin Newsom, said California will probably sue President Donald Trump over his emergency declaration to fund a wall on the U.S.-Mexico border Friday, Feb. 15, 2019, in Sacramento, Calif. Becerra says there is no emergency at the border and Trump doesn't have the authority to make the declaration. (AP Photo/Rich Pedroncelli)

BY KATHLEEN RONAYNE

SACRAMENTO, CALIF. (AP) — California is likely to sue President Donald Trump over his emergency declaration to fund a wall on the U.S.-Mexico border, the state attorney general said Friday.

Attorney General Xavier Becerra and Gov. Gavin Newsom, both Democrats, told reporters that there is no emergency at the border and that Trump doesn’t have the authority to make the declaration.

“No one in America is above the law, not even the president of the United States,” Becerra said. “The president does not have power to act frivolously.”

BY SEYE OLUMIDEABUJA (THE GUARDIAN)--Former Chief of Defence Staff, Lt. General Alani Akinrinade (rtd) in an interview with The Guardian on July 24, 2016, accused the ruling All Progressives Congress (APC) and President Muhammadu Buhari of deceiving Nigerians to win the 2015 election.

The retired service chief said the incumbent signed to a manifesto of restructuring before he secured the support of the Southwest leaders but rescinds immediately he got into office.

Four years down the line, restructuring is still a matter agitating the region few days ahead of the 2019 general election. Some leaders of the region, especially those holding political offices and are also seeking reelection on the platform of the ruling APC are skating around the subject basically because President Buhari and the national leader of the party, Bola Tinubu have refused to mention the matter the subject.

Senegalese President Macky Sall delivers a speech during his coalition's election campaign meeting at Lamine Gueye stadium in Kaolack, Senegal on 12 February 2019. Picture: AFP
DAKAR (AFP)--- Senegal goes to the polls Sunday in a presidential contest that incumbent Macky Sall, facing unusually few challengers in a country fond of vigorous political debate, is confident of winning in the first round.

His two biggest rivals -- popular Dakar ex-mayor Khalifa Sall and Karim Wade, the son of the previous president -- were disqualified after being convicted of corruption in trials questioned by rights groups.

"Victory in the first round is indisputable," a Macky Sall told a recent Dakar campaign rally.

Sall faces competition from four opposition rivals -- lesser-known perhaps, but campaigning hard against the president's plans for a second phase in a controversial infrastructure project called "Emerging Senegal."

A view shows the Bonny oil terminal in the Niger delta which is operated by Royal Dutch Shell in Port Harcourt Thomson Reuters

LONDON (REUTERS) - Nigeria has ordered foreign oil and gas companies to pay nearly $20 billion in taxes it says are owed to local states, industry and government sources said, in a move that could deter investment in Africa's largest economy.

In a letter sent to the companies earlier this year via a debt-collection arm of the government, Nigerian National Petroleum Corp (NNPC) cited what it called outstanding royalties and taxes for oil and gas production.

Royal Dutch Shell, Chevron, Exxon Mobil, Eni, Total and Equinor were each asked to pay the central government between $2.5 billion and $5 billion, said the sources, who saw or were briefed on the letters.

Norway's Equinor, which produced around 45,000 barrels per day (bpd) of oil in Nigeria in 2017, confirmed the request.

"Several operators have received similar claims in a case between the authoriti…

This illustration released on May 3, 2017 by the Obama Foundation shows plans for the proposed Obama Presidential Center with a museum, rear, in Jackson Park on Chicago's South Side. This view looks from the south with a public plaza that extends into the landscape. Odds still favor the eventual construction of Barack Obama's $500 million presidential museum and library in a park along Chicago's lakeshore. A judge hears arguments Thursday, Feb. 14, 2019, on a city motion to toss a parks-advocacy group’s lawsuit that argues the project violates laws barring development in lakeside parks. (Obama Foundation via AP, File)

BY MICHAEL TARM

CHICAGO (AP) — A federal judge gave the green light Tuesday to a parks-advocacy group’s lawsuit that aims to stop for good the delayed construction of former President Barack Obama’s $500 million presidential center in a Chicago park beside Lake Michigan.

Supporters of the project had hoped the court would grant a city motion to throw out the law…

In this Aug. 9, 2017 file photo, State Department spokeswoman Heather Nauert speaks during a briefing at the State Department in Washington. The State Department says Nauert, picked by President Donald Trump to be the next U.S. ambassador to the United Nations but never officially nominated, has withdrawn her name from consideration on Saturday, Feb. 16, 2019. (AP Photo/Alex Brandon, File)BY MATHEW LEE

WASHINGTON (AP) — Heather Nauert, picked by President Donald Trump to be the next U.S. ambassador to the United Nations but never officially nominated, has withdrawn from consideration, the State Department said.

Nauert, a State Department spokeswoman, said in a department statement that “the past two months have been grueling for my family and therefore it is in the best interest of my family that I withdraw my name from consideration.”

Nauert’s impending nomination had been considered a tough sell in the Senate, where she would have faced tough questions about her relative lack of forei…

Honda's President and CEO Takahiro Hachigo speaks during a press conference in Tokyo Tuesday, Feb. 19, 2019. Honda Motor Co. plans to close its car factory in western England in 2021, the company said Tuesday, in a fresh blow to the British economy as it faces its March 29 exit from the European Union. (Yuya Shino/Kyodo News via AP)BY KAORI HITOMI

TOKYO (AP) — Japanese carmaker Honda plans to close its car factory in western England in 2021, a fresh blow to the British economy as it struggles with the uncertainty associated with leaving the European Union next month.

The company announced the decision, which will imperil 3,500 jobs and possibly many more, at a news conference in Tokyo.

Honda’s president and CEO, Takahiro Hachigo, said the decision was not related to Brexit, but was based on what made most sense for its global competitiveness in light of the need to accelerate its production of electric vehicles.

Residents line up to buy propane gas in Port-au-Prince, Haiti, Monday, Feb. 18, 2019. Businesses and government offices slowly reopened across Haiti on Monday after more than a week of violent demonstrations over prices that have doubled for food, gas and other basic goods in recent weeks and allegations of government corruption. (AP Photo/Dieu Nalio Chery)BY EVENS SANON, DANICA COTO

PORT-AU-PRINCE, HAITI (AP) — Businesses and government offices slowly reopened across Haiti on Monday after more than a week of violent demonstrations by hundreds of thousands of protesters demanding the resignation of President Jovenel Moise over skyrocketing prices that have more than doubled for basic goods amid allegations of government corruption.

Public transportation resumed in the capital, Port-au-Prince, where people began lining up to buy food, water and gasoline as crews cleared streets of barricades thrown up during the protests.

WASHINGTON (AP) — Paul Manafort, the one-time chairman of Donald Trump’s presidential campaign, could spend more than 19 years in prison on tax and bank fraud charges, prosecutors said Friday.

Court documents filed by special counsel Robert Mueller’s office reveal that Manafort faces possibly the lengthiest prison term in the Russia investigation. The 69-year-old Manafort is also at serious risk of spending the rest of his life in prison if a federal judge imposes a sentence within federal guidelines.

The potential sentence stems from Manafort’s conviction last year on eight felony counts related to an elaborate scheme to conceal from tax authorities the millions of dollars he earned overseas from Ukrainian political consulting. It is one of two criminal cases pending against Manafort in w…